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Friday, December 16, 2016

MYR Outlook as at Dec 16, 2016

We have been having a tough time for quite a while now. However, I believe that things are beginning to turnaround. CPO, which has risen above RM3000 per ton, looks set to stay there for a while.


Chart 1: CPO's weekly chart as at Dec 16, 2016  (Source: ifs.marketcenter.com) 

On Saudi's initiative, OPEC and non-OPEC oil producers have agreed to minor production cut in crude oil output. This should sustain crude oil prices above USD50 in 2017.


Chart 2: WTIC's weekly chart as at Dec 16, 2016 (Source: Stockchart.com) 

We have yet to see MYR recovering against USD; not because we are not improving but because USD is gaining strength. USD index, which I thought would fall back below 100.5, has in fact charged above 103 yesterday. It may touch 110 before any consolidation may set in.


Chart 3: USD index's daily chart as at Dec 16, 2016 (Source: Stockchart.com) 

However we can see MYR is strengthening against SGD (see below). With this, I believe SGD-MYR may test the horizontal support at 3.05 next week.


Chart 4: SGD-MYR's weekly chart as at Dec 16, 2016 (Source: Investing.com)

If the above scenario of a recovery in MYR panned out, we may see improved sentiment in the stock market. Hopefully this would lead to a CNY rally. All of us - retailers, institutions and remisiers - need our ang pow after the dry spell in the last few months! Good luck to us!

2 comments:

Chong BoonKee said...

Hi Alex,

Based on the USD/MYR chart since 2005, it seems like a cup with handle pattern. If it execute, target price will be 6. What's your opinion?

Alex Lu said...

Hi Chong BoonKee,

Thank you for your sharing. USD-MYR does have a nice Cup-with-handle formation stretching from Mar 2009 to Mar 2015.

The conventional approach to arrive at the target is by taking the depth of the cup and adding it to the breakout value.

The depth is about 0.75 [computed by deducting the Jul 2011 low of 2.95 from the Mar 2009 or Mar 2015 high of 3.70). If you add 0.75 to the breakout value of 3.70, you will arrive at the target of 4.45. USD-MYR touched that target in Sep 2015 before correcting.

In the past 14 months, USD-MYR had traced out another Cup-with-handle formation, with a depth of 0.55. If USD-MYR were to surpass the break value for the 2nd Cup-with-handle at 4.45, USD-MYR may rise towards the new target of 5.00.

Since everyone is using technical analysis to trade these days, we cannot expect our trades to go according to the textbook every time. If you like a good article to read on how to trade Cup-with-handle, try this: http://tradingsim.com/blog/how-to-trade-the-cup-and-handle-pattern/